Archive for the ‘Uncategorized’ Category
Joke on Economists
The joke was attributed to Paul Samuelson, a major american economist who passed away a few days ago. As explained here by Edward Glaeser, Samuelson’s is the person who “forever fused economics with math“.
(Image possibly subject to copyright: source here)
The Orwellian Numbering of Article 101 TFEU
For all Orwell’s 1984 fans, the new numbering of former Article 81 EC involves a puzzling, unfortunate, coincidence. In Orwell’s brilliant novel, Article Room 101 is “a torture chamber in the Ministry of Love in which the Party attempts to subject a prisoner to his or her own worst nightmare, fear or phobia“.
As argued by many competition practitioners lately, the fact is that applying Article 101 TFEU – and in particular, Article 101(3) TFEU – is akin to entering into a room of intellectual contorsions, risks and uncertainties of Orwellian magnitude. Thanks to my colleague Christian Bergqvist for the pointer.
(Image possibly subject to copyright: source here)
We Can’t Talk about Pricing…
Skimming through some US antitrust cases I came across an interesting passage that I confess I’d never read before (it’s one of those ‘smoking gun’ sort of things that somehow always catches our eye). This is an unaltered excerpt of the 5th Circuit’s Opinion in US v. American Airlines 743 F2d 1114 United States v. American Airlines Inc L
“For some time before February 1982, American and Braniff were competing fiercely for passengers flying to, from and through Dallas Fort Worth, by offering lower fares and better service. During a telephone conversation between Robert Crandall, American’s president, and Howard Putnam, Braniff’s president, the following exchange occurred:
Crandall: I think it’s dumb as hell for Christ’s sake, all right, to sit here and pound the * * * * out of each other and neither one of us making a * * * * * * * dime.
Putnam: Well– Crandall: I mean, you know, goddamn, what the * * * * is the point of it?
Putnam: Nobody asked American to serve Harlingen. Nobody asked American to serve Kansas City, and there were low fares in there, you know, before. So–
Crandall: You better believe it, Howard. But, you, you, you know, the complex is here–ain’t gonna change a goddamn thing, all right. We can, we can both live here and there ain’t no room for Delta. But there’s, ah, no reason that I can see, all right, to put both companies out of business.
Putnam: But if you’re going to overlay every route of American’s on top of over, on top of every route that Braniff has–I can’t just sit here and allow you to bury us without giving our best effort.
Crandall: Oh sure, but Eastern and Delta do the same thing in Atlanta and have for years.
Putnam: Do you have a suggestion for me?
Crandall: Yes. I have a suggestion for you. Raise your goddamn fares twenty percent. I’ll raise mine the next morning.
Putnam: Robert, we–
Crandall: You’ll make more money and I will too. Putnam: We can’t talk about pricing.
Crandall: Oh bull * * * *, Howard. We can talk about any goddamn thing we want to talk about.
Putnam did not raise Braniff’s fares in response to Crandall’s proposal; instead he presented the government with a tape recording of the conversation.
(Image possibly subject to copyrights: source here)
Antitrust goes political
In the global world we live in, US parliamentary representatives now directly write to the EU administration requesting it to speed up the review of business transactions involving US firms (!).
On 24 November, John Kerry and Orrin Hatch took the lead of a group of 59 Senators to request the EU Commission to quickly close its review of the Oracle/Sun Microsystems merger, approved earlier by the DoJ. Obviously, this is no more than political gesticulation. Yet, the context surrounding this letter exhibits again the GE-Honeywell-reminiscent “patronizing rethorics” which pollute transatlantic cooperation between competition agencies and, incidentally, affect adversely the interests of the firms under review.
In a nutshell, the Senators argue that since US agencies found no antitrust issue, it would be odd for the EU to raise competition concerns. The words used by Senator Hatch are crystal-clear:
“This transaction has been thoroughly reviewed by the United States Department of Justice, which has decided to take no action. Therefore, I hope the EC will quickly conclude their investigation into this transaction.”
Of course, there are many compelling reasons why an additional review of the EU is legitimate. The US review deals with the merger’s effects only on US territory, and not in the EU. In addition, one may argue that the intervention of a new agency is actually a good thing. First, the US agencies may be wrong on the substance. Second, the US may also be biased when it comes to a transaction involving US firms active on global markets.
Overall, rather than writing to an external agency on which they have no legal influence whatsoever, US Senators should seek to use their legislative powers (if my recollections are correct, they have a say on external relations) to devise a credible US position re. the way forward in terms of global antitrust.
This is also – although slightly different – the position of Commissioner Kroes, who urged the Senators to focus on other, more important, issues… As reported by the AP:
Kroes slammed the senators for “interfering in someone else’s decisions rather than taking the most important decision that you have control over: improving health care.”
“Is this really more important than fixing your own health care system?” she asked in a speech, adding that the senators needed to get their priorities straight.
I paste below the official text of the letter.
“As fellow government officials committed to the principle that competition is the cornerstone of healthy economic growth, we would like to take this opportunity to share our thoughts with you as to the proposed acquisition of Sun Microsystems, Inc. by Oracle Corporation. In addition, due to Sun Microsystems’ deteriorating financial condition and the possible negative effect on employment of the company’s workforce, we respectfully request the European Commission expedite the completion of its investigation into this transaction.
The United States Department of Justice, after an intensive investigation, closed its inquiry into this transaction without taking any action. In fact, the Justice Department did not find documentary evidence that this acquisition would harm competition. We recognize that the European Commission has a sovereign right to thoroughly investigate transactions where corporations utilize the European Union’s marketplace. Further, it is our understanding the Commission is concerned about competition in the database software market. However, we have been informed by Sun Microsystems that their subsidiary, which competes in this specific market, generates only €17 million in revenue and that the same market has competitors with capitalizations of tens of billions of Euros.
Unfortunately, Sun Microsystems’ financial position has become more precarious and the Commission’s inquiry has continued. Some have raised concerns over the company’s ability to continue to employ its thousands of workers. Accordingly, we respectfully request the European Commission complete its investigation of this transaction as quickly as possible.
Thank you for your attention to this matter“.
(Image possibly subject to copyrights: Source here)
Lost in Semantics
Pursuing the “Lost in” post series initiated a few weeks ago, and chasing possible inconsistencies in EU competition law, I recently noticed that Regulation 2658/2000 and its accompanying set of Guidelines on Horizontal Cooperation Agreements use a different wording to regulate the – almost – same categories of horizontal agreements.
Regulation 2658/2000 block exempts “specialisation agreements“. This expression is in turn defined under Article 1 of the Regulation. Pursuant to this provision, specialisation agreements cover:
“(a) unilateral specialisation agreements; or (b) reciprocal specialisation agreements; or (c) joint production agreements”.
Now, let’s turn to the Guidelines. At §§78 and following, the Guidelines refer generally to “production agreements” rather than to “specialisation agreements“. This, in and of itself, is already slightly confusing as what was a sub-example in the Regulation (see (c) above), becomes a generic type of agreements. The Guidelines further blur the dividing lines defined in the Regulation in stating that “production agreements” cover (§79):
“Joint production agreements; … unilateral or reciprocal specialisation agreements; … and subcontracting agreements (emphasis added)”…
The bottom line: messy semantics do not make good law.
(Image possibly subject to copyrights. Source here)
2009 Worst Antitrust Law Development Prize
The end of the year is approaching fast. I copy, again, our call for suggestions re. the worst 2009 development in antitrust law. To date, I have received several submissions, and I would like to thank those of you who referred cases and quotes. For those who have not yet sent me an email, please note that I commit to treat confidentially all referred items and will under no circumstance disclose the identity of referrers.
With the awards season coming to a close, it is perfect timing to introduce the prize for the worst antitrust law development of the year. For the first time this year, this prize will reward a ruling, article, speech, career-move, research issue, policy initiative, or any other thing that has been undertaken, said or written that is stupid, infamous, crazy.
The prize will be awarded by the end of December 2009. Please refer to me anything that could qualify for it. I will keep all the info absolutely confidential, and will set up a jury of lawyers to award the prize (Alfonso and myself will be part of it). If you’d like to join, please let me know.
To give you an example: in 2005, a Dutch judge stated in 2005 that the Commission had exclusive competence to exempt an agreement under Article 81(3) EC (Rechtbank Zwolle-Lelystad, 4 April 2005, case n° 106345 / KG ZA 05-92, Walstock / Polar Electro). Surely, a strong candidate for this prize, had it been awarded in 2005.
The New Faces of Europe
The appointment of Herman Van Rompuy and Catherine Ashton as the visible faces of the EU has come as a surprise both within and outside Europe. The public reaction –or rather the media reaction- following the announcement has criticized their appointment on the basis of their ‘low profile’ and lack of EU-related experience, has highlighted the fact that neither of them has ever been elected to public office, and has even focused –not very kindly- on their physical appearance (!).
Although this blog doesn’t deal primarily with European politics, this is an issue which surely deserves a comment. Moreover, it reveals an endemic problem which, amongst other implications, also affects the ability of DG Comp to perform its role adequately. I do not host any criticism towards Mr. Van Rompuy or Mrs. Ashton. In fact, the contrary would be odd, since so far I know very little about them, about their previous accomplishments or about the agendas they intend to pursue. No elements can so far rebut the presumption that these are able people who may defeat the low expectations which seem to have followed their appointment. We should hopefully recall that similar criticisms arouse when Delors was appointed, and he certainly prevailed over skeptics.
My first concern is purely political (and leaves aside the Belgian problem of having to wake up, again, without a Prime Minister). The rationale of many commendable policies and actions in the European field has been to reinforce the EU’s legitimacy, to enhance transparent and democratic decision-making and, in essence, to approach it to the citizen. This was also one of the reasons for deciding in the first place to name one visible permanent President of the European Council. However, even a passionate pro-European can’t help but wonder whether we are asking the citizens too much when we intend them to feel attached to a project whose new faces are unknown not only to them but also to many of the leaders who have appointed those people. This is no doubt a rather interesting way of reinforcing the link between the citizens and the European institutions.
My second and main concern is a different one, and relates to a worrying tendency that is by no means new in the European environment, but which seems to be getting more acute with time. It seems that in order to be promoted to any higher post subject to political approval a ‘flexible’ profile is often a pre-requisite (it should go without saying that there are also numerous exceptions to this rule). Many are conscious that a meteoric career at the institutions partly depends on one’s willingness not to step on anyone’s foot, to bend or accommodate to national political pressures, and to always consider the political implications (i.e. the interest of larger Member States) relating to any action or decision, sometimes at the expense of more important considerations.
Such dynamic also has an impact on the DG-Comp and on its ability to undertake cases in the light of their economic relevance or pursuant to the need of establishing precedents and providing guidance on technically complex matters. Many of our readers are probably familiar with the experience of presenting a reasonable problem to the Commission and being rejected because of the presumable lack of political support on the part of specific powerful Member States. Ironically such refusals may eventually be effected under the cover of an alleged ‘lack of Community interest’.
The problem is therefore much larger than this isolated appointment episode, which only evidences the prevailing attitude. It is certainly no easy task to achieve consensus between 27 national political interests, but this should be no excuse for implying that consensus requires converging on the minimal common denominator. That, I believe, is comfortable, irresponsible and short-sighted politics. The European project was grounded on the vision and will of true statesmen who held political views and aspirations much higher than those currently prevailing. At a time when Europe needs to define its future role in the world stage, when audacious politics are needed more than ever, that’s when we –by failing to demand our leaders to abandon self-complacency and to act boldly as needed- are screwing it all up.
10,000 Visits
We officially launched this blog on 9 September 2009. In a little more than 2 months, we got 10,000 visits.
Thanks to all of you for reading us.
Nicolas and Alfonso
Why Law Matters – Evidence from PepsiCo’s Secretarial Failures
Law has become a truly important aspect of firms’ business strategies (apologies for stating the obvious but similarly to poor good antitrust papers, an attractive post must start with a sweeping strong statement).
Yet, in the view of a significant share of firm’s personal, legal matters remain often perceived as secondarily important, “support”, matters as compared to finance, marketing, etc. A recent story shows that it is crucial to raise personal awareness to the fact that legal matters/risks are almost equally as important as other “core business” issues. As reported by Reuters recently:
A Wisconsin judge has ordered PepsiCo Inc to pay $1.26 billion to two men who said it stole their idea to sell purified water after a secretary mislaid a document alerting the world’s No. 2 soft drink maker the lawsuit existed.
It is reported that the sum of $1.26 billion represents 20% (!) of PepsiCo’s average yearly profit (BTW: an amount which is in the range of the fines now imposed by the EC antitrust authorities). It is also reported that the secretary was too busy preparing a board meeting, of a supposedly higher importance…
For more on the fact that firms’ legal performance (in terms of compliance processes, litigation strategy, etc.) may influence their market competitiveness, see the innovative research carried out by Christophe Roquilly and Christophe Collard from LegalEDHEC as well as a book published under the direction of Antoine Masson earlier in the year.
Lapsus
The Commission’s prosecutorial bias in official writing… I did not immediately notice, but this is undeniably a big, important, mistake.
At § 12 of its Guidance Communication on its enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings, the Commission explains the objective methodology that it will follow to assess dominance.
Read carefully:
The assessment of dominance will take into account the competitive structure of the market, and in particular the following factors: • constraints imposed by the existing supplies from, and the position on the market of, actual competitors (the market position of the dominant undertaking and its competitors);
Read again:
The assessment of dominance will take into account the competitive structure of themarket, and in particular the following factors:• constraints imposed by the existing supplies from, and the position on the market of, actual competitors (the market position of the dominant undertaking and its competitors);
In other words, the Commission pretends it will systematically review whether there is dominance, but meanwhile implies that this three stages approach is entirely redundant, because it has already reached this finding. A strong candidate for the 2009 worst antitrust law prize?
Chillin'Competition 
